Regulation

FINRA Requests Comment on Proposed New FINRA Rule 3190 to Clarify the Scope of a Firm’s Obligations and Supervisory Responsibilities for Functions or Activities Outsourced to a Third-Party Service Provider

when a member firm outsources a function or activity related to its business as a regulated broker-dealer to a third-party service provider, it does not relieve the firm of its obligation to comply with applicable securities laws and regulations and FINRA and Municipal Securities Rulemaking Board (MSRB) rules; and

the firm cannot delegate its responsibilities for, or control over, any outsourced functions or activities. The proposal also requires a member firm to have supervisory procedures, including due diligence measures, to ensure that its arrangements with third-party service providers are reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA and MSRB rules. Further, the proposed rule imposes additional restrictions and obligations that apply solely to a clearing and carrying member firm and its third-party service provider arrangements.

The text of the proposed rule is set forth in Attachment A.

Questions concerning this Notice should be directed to Patricia Albrecht, Associate General Counsel, Office of General Counsel, at (202) 728-8026.